Islamic State threat cools outsourcing boom in PH

Prolonged fighting by Filipino militants supporting the Islamic State group has put the brakes on the Philippines’ $10 billion outsourcing industry, one of its key growth drivers, industry leaders said Wednesday.

More than 900 people have been killed in the city of Marawi, where pro-IS militants have defied a months-long US-backed military campaign to flush them out, while the southern third of the country has been placed under martial law to contain the violence.Although the lucrative outsourcing industry is largely based in the northern and central regions, the bloody conflict has unnerved many potential investors, said officials of the Information Technology and Business Process Association of the Philippines (IBPAP).

“In the early part of the year, we had a lot of ‘wait-and-see’ attitude for the most part,” said IBPAP president Rey Untal.

Approved investments in the information technology services sector, which includes the outsourcing industry, fell 31.3 percent from a year earlier in the three months to June, government data show.

“There is an element of (wait and see) still,” Untal told reporters, though there were now signs that new players were coming in.

The outsourcing industry includes call centers and offices that carry out such functions for overseas companies like accounting, medical and legal transcription, software design, animation and even architecture.

It has become a major pillar of growth of the Philippine economy, bringing in $23 billion in revenues last year and employing 1.15 million people according to industry officials.

When the Marawi violence broke out in May, the industry was bracing for the fallout of the protectionist threats issued by US President Donald Trump, who has vowed to bring back jobs outsourced abroad, Untal said.

“Then suddenly we had to deal with that (Marawi) also. In every conversation I had, that figured in,” said Untal.
Industry leaders had to assure investors that work would continue with “business as usual,” despite the fighting, he said.

Industry leaders also obtained government assurances that its employees would be exempt from martial law curfews in the south, IBPAP vice chairwoman Cathy Ileto said.